Staples may spin off its retail chain to Office Depot

A merger between Staples and Office Depot may finally be in the cards — but it won’t be the kind that company brass had longed for, or that regulators had feared.

Staples, which agreed a month ago to be acquired by private-equity firm Sycamore Partners for $6.9 billion, has also lately held talks to spin off its 1,500 retail stores to longtime rival Office Depot, sources told The Post.

Such a deal, which would have to be cut by Staples’ new owner Sycamore, would create the nation’s only big-box office-supplies chain, with thousands of locations coast to coast under the Office Depot name.

Still, its price tag would be dwarfed by the value of Staples’ pending buyout as doubts about the prospects for brick-and-mortar stores grow, according to insiders.

If Staples got out of the retail business, “It would be the end of an era,” says Craig Johnson, president of retail consultancy Customer Growth Partners. “This is a company that helped create the idea of a superstore. Unfortunately, the concept of a superstore has come and gone.”

Staples revealed in a public filing last week that on June 5, a bidder it called “Party A” offered between $625 million and $700 million for Staples’ North American retail locations.

“Party A” was Office Depot, which was angling to rebrand the Staples locations under its own name, according to a source close to the situation. Staples shunned the bid, agreeing instead on June 28 to go private under Sycamore in a buyout valued at 10 times the price of Office Depot’s retail deal.

Indeed, Sycamore Partners paid a premium not for Staples’ stores, but rather to control the company’s lucrative business selling paper, pens and ink cartridges to mid-size and big corporate clients.

As such, sources say Sycamore has signaled a willingness to offload the stores which, like much of the retail sector, are struggling as shoppers increasingly shift their buying to online rivals led by Amazon.

It’s not clear whether Office Depot and Staples have rekindled talks, but with Sycamore a willing seller, Office Depot is the most logical buyer, insiders said.

In a call last week with potential lenders to Staples’ distribution or “delivery” business that serves corporate accounts, Sycamore executives “tried very hard not to talk about retail,” according to an investor who listened to the presentation.

“They only thing they said about retail was they did not see much delivery business happening in the stores,” according to the source.

As it looks to finance the buyout, Sycamore is separating the distribution business from the retail side. Likewise, Sycamore execs have assured lenders that if the stores are sold, there will be no impact on lenders to Staples’ distribution business, according to sources.

The nation’s two leading office-supplies chains tried and failed to combine their businesses in a pair of mega-deals — one in 1997, the other in 2015 — but were smacked down both times by the Federal Trade Commission on antitrust concerns.

Fears of a retail monopoly helped thwart the 1997 deal, but by 2015 then-FTC Chairwoman Edith Ramirez fretted that a merger was “likely to eliminate beneficial competition that large companies rely on to reduce the costs of office supplies.”

Staples said in its filing last week that the all-stock offer last month from “Party A” carried regulatory risks. But with competitors like Walmart, Costco and Target selling office supplies in a tough sector, few expect an Office Depot acquisition of stores would get blocked.

“Combining Staples and Office Depot may well make sense,” according to Johnson. “Granted, the combined fleet will still have to be consolidated and there would be store closures.”

Meanwhile, Sycamore appears to be betting that Staples’ expertise negotiating the hassles of corporate supply contracts will remain a significant barrier as Amazon looks to gain a foothold in office supplies.

That may turn out to be a risky bet, too. Last week, Amazon said its office-supplies business has served 1 million business customers since its launch two years ago, and that it has grown 150 percent over the past year.

Staples and Sycamore spokespeople declined comment. Office Depot did not return calls.